State Street Votes Against 400 Companies Citing Gender Diversity

Index-fund giant State Street Global Advisors voted against the reelection of directors at 400 companies this year on grounds they failed to take steps to add women to their boards.

The money manager, a unit of custody bank State Street Corp., said it discovered that 476 companies whose shares it owned lacked a single female board member. Of that group, the Boston-based firm said 400 companies failed to make any significant effort to address the issue, and voted against the reelection of directors charged with nominating new board members.

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State Street, which oversees more than $2.5 trillion in assets, had pledged in March to throw its weight behind the issue of gender diversity this year. At that time, State Street said a firm that doesn't have women on its board, for example, would have to prove to State Street it attempted to cast a wider net and set diversity goals.

Primarily a manager of exchange-traded funds and other so-called passive investments, the firm targeted companies within Russell 3000 Index, the U.K.'s FTSE 350 and S&P/ASX 300 in Australia. State Street owns a combined 3,500 stocks in those three indexes.

State Street said it had productive discussions with 42 of the 476 companies that had zero female directors. In 34 instances, neither the chairman of the board's nominating and governance committee nor the panel's senior member came up for reelection this year.

State Street is among the largest passive fund managers in the world -- a sector that is amassing significant governance power as investors pour billions into lower-cost index-tracking funds like exchange-traded funds.

While some critics have questioned whether these passive giants would be as hard on corporate boards as active managers had been in the past, State Street has taken an aggressive stance on certain corporate-governance matters. In recent years, for example, the firm focused on long-tenured board members.